overhead
OH-ver-hed
/ˈoʊvərˌhɛd/
The ongoing administrative and operational expenses of a business which cannot be attributed to any specific business activity.
These are the costs of staying open (rent, utilities, insurance) regardless of how much you sell.
The story behind the word. The term originated from the literal 'roof over your head'. It refers to the costs required to keep that roof there, such as rent and maintenance, before any work even begins.
Word relationships
- operating expenses: Operating expenses is a broader accounting term; overhead specifically emphasizes the 'fixed' nature of the costs.
- direct costs: Expenses that can be traced directly to the production of specific goods.
Commonly confused with
- capital expenditure: CapEx is for long-term assets (buying a building); overhead is for ongoing costs (paying rent on that building).
Collocations
- low overhead
- fixed overhead
- operating overhead
Idioms & expressions
- keep overhead low
Example sentences
- "The high overhead of a brick-and-mortar store is why many entrepreneurs prefer online businesses." Small Business Management
- "We need to reduce our administrative overhead by at least fifteen percent this quarter." Corporate Finance
Memory hook
Think of the costs literally floating 'over your head' like a cloud that follows you whether you work or not. The cost of the roof.
When not to use
Do not use for 'direct costs' like the raw materials used to make a specific product.
Fun facts
- In the UK, overheads are often called 'burden' in manufacturing contexts.
Related words
Explore more words
expense, administrative, ongoing, Cost of living, scalable, expenditure
Take your vocabulary further with LangBlitz
Our English vocabulary app: FSRS spaced repetition, 5,000+ curated words across 119 topic groups, CEFR A1 to C2. Explore your mastery with the beautiful Vocabulary World feature.